Advocates for poor wary of restoring food tax

Utah is among seven states nationwide that tax groceries at a lower rate than other goods. Raising the sales tax on food surfaces in the Utah State Legislature every few years. (Shutterstock )

SALT LAKE CITY — Food is one of Lou Anne Stevenson's biggest expenses.

The 56-year-old Salt Lake City woman lives on Social Security and other government assistance totaling about $1,020 monthly, about $300 of which goes for groceries.

"I'm not living extravagantly," said Stevenson, who is on a special diet due to hypoglycemia and other health issues.

Stevenson isn't sure how she would deal with a hike in the sales tax on food, a proposal currently being considered by the Utah Legislature.

"I have a hard enough time just trying to keep food on the table as it is," she said, adding that weather patterns and food shortages continue to drive prices up. "I don't know how we're going to survive, and they want to more than double the tax on food on top of it."

Raising the sales tax on food surfaces in the Legislature every few years. It typically pits advocacy groups for low-income Utahns against lawmakers, and lawmakers against each other. The Senate has been amenable the idea, while it has met resistance in the House.

The proposal this year has a twist that sets it apart from ones in the past: A tax credit and a tax refund to offset the tax hike.

"What was offered was 'Let's Make a Deal,' and we don't play 'Let's Make a Deal.' That's what makes this year different," Hilton said. "We aren't going to make a deal."

Utah is among seven states nationwide that tax groceries at a lower rate than other goods, while two states apply general sales tax rate to food. Five states tax food but offer credits or rebates to offset the tax. The remaining states exempt most or all food purchases from sales tax.

Sen. John Valentine, R-Orem, said he wants to see the state sales tax restored on food purchases to stabilize often-volatile tax collections without hurting the Utahns who most benefit from paying less at the grocery store.

"My whole goal is to try to bring some stability to the state of Utah and to give back to some of our lowest-income people a little more than they're getting now," Valentine said, promising any changes would be revenue neutral.

His initial draft boosts the state sales tax on food from 1.75 percent back to the same 4.7 percent state rate paid on other purchases. Then-Gov. Jon Huntsman Jr. was behind the reduction, made over 2006 and 2007.

The proposal would also provide an $80 annual refundable food tax credit to each member of a family earning less than $35,000 a year, or $40 each for families earning between $35,000 and $60,000.

In addition, it would allow families that qualify for the federal Earned Income Tax Credit to get a check for an amount equal to 5 percent of the federal credit from the state.

Valentine, a tax attorney, said the average Utahn spends $80 a year on food taxes. Under his proposal, a single mother with one child earning less than $35,000 would receive a total of $314 back — $154 more than they would likely pay in food taxes.

While there has long been talk of rolling back the sales tax cut, Valentine said this might be a good time to try again. More lawmakers, he suggested, may be regretting losing a reliable source of revenue after the economic downturn.

Plus, 2013 is not an election year.

"It's going to be easier to look at it because the political storms aren't nearly as intense as they would be right before an election," the former state Senate president said.

But House Speaker Becky Lockhart is dead set against tampering with the food tax and believes most House Republicans are, too.

"What he's talking about is a shift. Somebody's going to pay the tax," Lockhart said. "I have a problem with that."

The Provo Republican said she is also uncomfortable with the bureaucracy needed to process the claims for the refundable food tax credit and the difficulty filing the paperwork would create for some Utahns, especially those who don't earn enough to file income tax returns.

"When you're talking about individuals in that income tax bracket, these are people who are looking for $10 this month," Lockhart said. "They're trying to survive."

The House strongly backed Huntsman's efforts to cut the sales tax on food over two legislative sessions, while the Senate reluctantly followed. Several efforts to reverse the reduction have surfaced since, but went nowhere.

House Democrats have not yet taken a position on the issue, incoming House Minority Whip Tim Cosgrove, D-Murray, said.

"We're concerned about the changes," Cosgrove said. But he said there are pluses to making more money available to those most in need.

"This is complex," he said. "It has many, many potential impacts on people of low income."

The tax hike of approximately $140 million annually would have a serious impact on the average Utah working family, who would see their food bill jump by about $240 a year, according to Glenn Bailey, executive director of Crossroads Urban Center, a downtown nonprofit agency that provides services for poor people.

Voices for Utah Children raised the idea of an earned income tax credit for low-income Utahns at a legislative committee meeting last month. That prompted lawmakers to start asking questions about raising the food tax, said Tracy Gruber, Voices policy analyst.

"They were trying to get us to say increase the sales tax on food so we can get the EITC, which we're not willing to say," she said.

Gruber said it's imperative that Utahns recovering from the recession and trying to become self-sufficient don't bear the brunt of a tax increase. A tax credit, she said, would be one way to ease the impact.

"I think we are very cautious about the legislation," Gruber said. "We definitely discussed with Sen. Valentine the need to mitigate the damage for low-income Utahns if they were going to reinstate the sales tax on food."

Gina Cornia, executive director of Utahns Against Hunger, said she understands lawmakers' desire to stabilize the tax base. She also said she appreciates the effort to offset an increase with tax refunds and credits. But, she said, it would just be better to not raise the tax at all.

"Every time you pay sales tax or every time you go to the grocery store, it might not seem like a lot at the moment, but over time it adds up," Cornia said.

"I can't imagine a world where Utahns Against Hunger could support increasing the sales tax on food. It's just not going to happen," she said.

The Rev. Eun-Sang Lee of the First United Methodist Church said raising the tax would hurt his 180-member congregation, about a third of which live in government housing or on the street. From a Christian perspective, he said, how the poor are treated says a lot about a community.

In Colorado, where he worked before coming to Utah, there is no sales tax on food. Said Lee, "I really want to see that happen here."